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Wednesday, November 12, 2008

Interview with Matthew Graczyk, Zubican

Matthew Graczyk is founder of angel-backed Zubican (www.zubican.com)--saw a problem, which was the difficulty of finding suppliers for products for businesses--and decided to solve the problem, with a site specifically targeted at helping B2B buyers and sellers connect. Matthew spoke to us to give us a better idea of what the company offers and why it was started.

What's the idea behind Zubican?

Matthew Graczyk: Zubican is an online business community, devoted to connecting business to business buyers and sellers. Personally, I've been an entrepreneur for 15 years, running companies with P and L responsibility for divisions, and watched with frustration as the Internet has grown up around us. There are lots of solutions for consumers and B2C sellers, but the B2B market has largely been neglected. It's crazy--the market is twice the size of the consumer market--consumers spend around 9 trillion dollars a year in the U.S.--but businesses spend 18 trillion a year, but very few companies are trying to facilitate that kind of commerce.

What's your background, and how did you decide to start the company?

Matthew Graczyk: I remember the day I decided what I was going to do next. It was the third week of December 2006, and I was involved with a biodiesel company. We were doing a reverse merger, and taking it public, raising $25M. We did all that, and got lots of exposure, and there was the potential for a very large order to buy our biodiesel reactors for manufacturing biodiesel. So, I went out on the Internet to try to find a machine shop--another B2B purchase--to manufacture our rotors. I couldn't find them, and was frustrated by the lack of resources for B2B buyers. After we took the firm public, I was on to my next project, to figure out, since this is a big problem that needed to be solved, how to go about solving it. The more I dug, the more promising the opportunity seemed, and that need seemed desperate.

Who are you targeting with this -- buyers at companies?

Matthew Graczyk: Both buyers and sellers. The crazy thing about it, is buyers know exactly what they want, and sellers know exactly what they offer. In the consumer space, this has been solved very well, category after category. In travel, you go to Expedia, Travelocity, or a meta search engine like Sidestep. For books, mortgages, or digital cameras, you can go somewhere and put in a detailed search criteria, and find a detailed solution. Someone matches together the buyers and sellers. In the B2B world, that just doesn't exist.

We see you have quite a few businesses listed on your site, how are you populating that data?

Matthew Graczyk: We believe we have the most comprehensive database of U.S. companies on the Internet. We have detailed business profiles for virtually every company in the U.S., build in three different ways. Once, is we've licensed content from sources, two, is companies can take control of their profile and customize their information, and three, we've harvested information off the Internet to augment the profiles. Over time, as companies take control of their profiles, it becomes more and more unique. It's a full-blown, B2B social network. You can link profiles together, rate and review companies, and reach outside companies with links. It's a double viral loop. That's how we are getting traffic and driving awareness. We've also got SEO feed pages. Because we have a large, structured database, we are using SEO to feed content to the search engines. It's just a matter of time--when someone goes to Google and searches for a ball bearing, that search will be dominated by our content.

Why hasn't a service like this been available until now?

Matthew Graczyk: Buying with businesses and consumers is different. With consumers, they shop for things. Businesses show for companies. Seventy-seven percent of all buying on the business side is buyer driven. But, on the consumer side, sellers are putting their opportunities in front of buyers, even if buyers are not in the market to buy. In B2B, that is flipped over. Buyers are looking for content, and that content is increasingly online. We're a great strategy for sellers to put themselves in the path of buyers.

What's the Z-Score you have on your site?

Matthew Graczyk: The Z-Score is really a measure of how good a company and their profile is. it combined the metrics of how a company is rated, if a company has taken control of their profile, how much data we have, and how recently it was updated, and how often that profile is used by users. The score allows users to quickly look at a list of company profiles, and see which ones are the ones they should focus their attention on.

How are you funded and backed?

Matthew Graczyk: I started the company in December of 2006, but I knew I wanted a strong finance and operations person, and a strong etch person. I went into my network--and I have pretty extensive experience in the internet space, with Digital Evolution and with U.S. Interactive afte their merger--so I know lots of people with those credentials. I was able to recruit a top candidate in finance, Brian Newton, we had worked together at an Internet company in early 200. Joe Kevin, our CTO, I've known for fifteen years, and worked for two years in early stage Internet companies. We were funded a little over a year ago, which allowed us to get past some key milestones and get a higher valuation. When we thought we had the right mix, we went to look for angel capital, and raised $1.3M in angel capital from the Tech Coast Angels, Pasadena Angels, and other unaffiliated angels. We have some really key people involved, including Robin Richards, who has taken five companies to 100M plus exits, including Tickets.com, MP3.COM, and Vivendi Universal. Another person worth mentioning is Austin Murray, the lead founder of Jamdat, who sold Jamdat to EA for $680M. He's now at Gogii, which has received investment from Kleiner. There's also a lot of other noteworthy people, including senior executives from Yahoo and others.

What's the business model behind the site?

Matthew Graczyk: It's all free for users, and that's really key. There were a number of vertical B2B exchanges that failed in the late 90's. I think a free solution is key for critical mass of both groups. So, the core revenue model is online advertising. We'll also be offering premium offerings, classifieds, e-stores built directly into profiles, and a whole bunch of other things--but the core model is advertising. B2B advertising is really an interesting story. A B2B ad is worth 850 percent more than a consumer ad, but if you talk to B2B advertisers, they complain about one thing--there's no place to put their ad. It's a problem for ad networks. b2B advertisers are willing and happy to place ads, but Google can't place them because of lack of inventory. When we launched our site in July, we had revenue from day one. On every page on Zubican, there is an ad. There's never time there are no ads, and yet we have a tremendous backlog.

What's next for the firm?

Matthew Graczyk: We're at a really exciting time. We've spent nearly two years working, behind the scenes, ready for launch. We've launched now, and have a critical mass of features and are busy executing our go-to-market strategy. Now we're out in the market, we tarking with companies to get them excited about this. This is a solution they need, and we'd love to have their participation. We have contact information for every company in the country, and we're telling them that here's your profile, take control of it for free, edit it, and link to others.